It’s time for Congress to fix the patent system for small businesses

The patent system is intended “to promote progress of science and the useful arts.” However, in the fast-moving mobile app industry, we are witnessing the opposite: patents are slowing innovation and serving the interests of exploitative patent trolls.

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Sometimes referred to as patent assertion entities (PAEs), patent trolls do not develop or sell new technologies. Instead, they build patent portfolios in order to turn around and license them to operating companies. The burden that this places on innovators drags down our economic recovery, slows job creation and effectively taxes our most innovative products and services. Despite important efforts like the America Invents Act (AIA), passed by Congress in 2011, the patent troll problem is getting worse.

Recent studies estimate that patent trolls cost the U.S. economy about $29 billion in 2011. This is money that could have funded research and development. Instead, it paid huge legal bills. The average legal defense against a patent troll costs a small- to medium-sized business $1.33 million.

While patent trolls take a toll on large corporations, it is startups and independent developers that are hit the hardest. A majority of companies targeted by trolls are relatively small, with annual revenues of less than $10 million. This is especially troubling because startups are responsible for much of the job creation in the U.S. economy today.

Trolls are the most visible outgrowth of our broken patent system, taking advantage of other problematic trends. A flood of low-quality software patents, many of which have ambiguous scope and are overbroad, makes operating in the Internet economy particularly stressful and unpredictable. By conservative estimates, there are 40,000 new patents on software issued each year. A startup, even with a full-time patent attorney on hand, which no one has, cannot be expected to make sense of the tangled and overlapping software patent landscape.

That’s why my organization, the Application Developers Alliance, is hosting Developer Patent Summits in 15 cities across the U.S. The events convene developers to share stories of threats from trolls, litigation, and ideas for reform.

The problems are so vast, and the patent trolls so well-funded, that we need real reform from Washington. Fortunately, we’re seeing promising signs that Congress agrees, and that they’re working hard to pass legislative solutions to improve the system for startups and developers.

All of this is welcome news for small business entrepreneurs, who are increasingly feeling the pain but are uncomfortable speaking out, fearing retribution from patent trolls. Congressional action would send a powerful signal that we can get the patent system closer to its constitutionally defined purpose: to promote — and not hold back — America’s innovation economy.

Potter is the president of the Application Developers Alliance, an industry association representing more than 20,000 individual developers and more than 100 companies.